Workers with mysterious facesYou probably think that your employees are limited to the people listed on your payroll. But under the joint-employer standard, one business’s employees can be imputed as another business’s employees for the purpose of employment laws and regulations. Earlier this week, the National Labor Relations Board (“NLRB”) announced its final rule for determining joint-employer status under the National Labor Relations Act (“NLRA”). The new rule provides welcome clarity for businesses involved with employees represented by labor unions.

Under the NLRA, if two businesses are joint employers, both must bargain with the union representing the jointly-employed employees. They face joint liability for each other’s unfair labor practices as well as the threat of disruption from labor disputes. The NLRB’s new rule returns to the traditional standard for determining joint-employer status that guided the analysis for decades prior to the disruptive 2015 decision in Browning-Ferris.

Browning-Ferris relaxed the standard for establishing a joint-employer relationship. Under Browning-Ferris, a business could become a joint-employer even if it did not exercise direct and immediate control over essential terms of employment. A joint-employer relationship could arise even if a business’s involvement with employment-related decisions was indirect, limited and routine, or contractually reserved but never exercised.

The NLRB’s new rule provides that a joint employer must possess and actually exercise substantial direct and immediate control over essential terms and conditions of employment. Substantial direct and immediate control requires a regular or continuous consequential effect, as opposed to a sporadic, isolated, or de minimis effect. Essential terms and conditions of employment are:

• Hiring
• Firing
• Discipline
• Supervision
• Direction
• Wages
• Benefits
• Hours of work.

The rule provides businesses with greater certainty in structuring their business relationships, particularly ones that utilize staffing agencies or other contract labor. It also provides unions with clarity about who they must negotiate with regarding the terms and conditions of their members’ employment. Employers should not assume, however, that a joint-employer relationship can never arise. Indirect control can still be a relevant factor in determining whether direct control is substantial, even if indirect control is insufficient by itself to establish a joint-employer relationship. Businesses must continue to exercise care and consult with their attorneys about how to avoid inadvertently establishing substantial direct control over others’ employees.

By adopting the rule, the NLRB joins the Department of Labor who issued a similar rule earlier this year for determining joint-employer status under federal wage and hour laws. The Equal Employment Opportunity Commissions (“EEOC”) is also expected to follow suit later this year for determining joint-employer status under federal anti-discrimination laws.